CarrAmerica Realty Assigned BBB Corp Cred Rtg by S&P.NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 6/4/97-- Standard & Poor's today has assigned its triple-`B' corporate credit rating to CarrAmerica Realty Corp., a real estate investment trust. The outlook is stable. The rating reflects CarrAmerica's strong market position, geographic diversification, and good financial flexibility. These strengths are offset by concerns regarding the company's rapid expansion and implementation of a national development program. Washington, D.C.-based CarrAmerica is an equity REIT Equity REIT A Real Estate Investment Trust that assumes ownership status in the property it invests in enabling investors of the REIT to earn dividends on rental income from the property and appreciation in property resale. Antithesis of a Mortgage REIT. that owns a portfolio of multitenant office properties located in 13 major metropolitan markets throughout the U.S. CarrAmerica has been a public company for four years, but has a 35-year history as an established developer/manager of office buildings in the District of Columbia District of Columbia, federal district (2000 pop. 572,059, a 5.7% decrease in population since the 1990 census), 69 sq mi (179 sq km), on the east bank of the Potomac River, coextensive with the city of Washington, D.C. (the capital of the United States). . The trust has grown very rapidly in the last 15 months as it has implemented a strategy of acquiring and developing office buildings in high-growth, suburban markets. This program was initiated as part of a new strategic alliance with Security Capital US Realty (SC), a Luxembourg-based investor in U.S. REITs. SC is CarrAmerica's largest shareholder, with over 36% of the common shares (on a fully diluted basis), and plays an active role in the company's strategic planning Strategic planning is an organization's process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy, including its capital and people. and oversight, with four directors on CarrAmerica's Board. Aided by over $1 billion in new equity, CarrAmerica has become one of the dominant owners of office properties in the U.S. in little more than one year. Since March 1996, CarrAmerica has acquired 191 operating properties totaling more than $1.3 billion in 12 new markets for the company. The trust's current portfolio comprises 204 operating office properties and over 15 million square feet in 13 markets: Atlanta, Ga.; Austin, Texas; Chicago, Ill.; Dallas, Texas; Denver, Colo.; Northern California; Phoenix, Ariz.; Portland, Ore.; Salt Lake City, Utah For ships of the United States Navy of the same name, see . Salt Lake City is the capital and the most populous city of the U.S. state of Utah. The name of the city is often shortened to Salt Lake, or its initials, S.L.C. ; Seattle, Wash.; South Florida; Southern California; and metropolitan Washington, D.C. Portfolio occupancy, excluding properties in development, has improved to 94.7% at March 31, 1997 from 92% in 1996, mainly due to the aggressive marketing of vacant space. As of March 31, 1997, the company had five properties under construction totaling 846,000 square feet, of which 73% was pre-leased. CarrAmerica is also purchasing land in numerous markets where it plans to develop small, suburban office buildings on a pre-leased basis, or speculative basis when warranted by strong market conditions. Financial measures are strong, with debt-to-book capitalization of 43%, and debt-to-implied market capitalization Market Capitalization A measure of a public company's size. Market capitalization is the total dollar value of all outstanding shares. It's calculated by multiplying the number of shares times the current market price. This term is often referred to as market cap. of 32% as of March 31, 1997. Book leverage, including preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. , is expected to remain at or below 50%, which is appropriate for the rating category. Debt service coverage, which includes principal amortization and capitalized interest Capitalized interest Interest that is not immediately expensed, but rather is considered as an asset and is then amortized through the income statement over time. In the context of project financing, interest that is paid by additional borrowing. , is 2.9 times (x) and is expected to remain above 2.5x. Fixed charge coverage, which includes preferred dividends, should remain above 2.0x. Financial flexibility is good, with a strong record of recent common stock offerings and adequate availability under the company's $325 million unsecured bank facility. Currently, about 50% of the portfolio is unencumbered on a net operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. basis. Unencumbered net operating income will increase to 56% later this year when the proceeds from the likely issuance of unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. or preferred stock will pay down existing secured bank debt. OUTLOOK: Stable. Standard & Poor's expects CarrAmerica to continue the smooth integration of acquired properties into its national operating system. In addition, a manageable lease rollover A graphic element in an application or on a Web page that changes its color or shape when the pointer is moved (rolled) over it. See JavaScript rollover. See also n-key rollover. schedule and improving rental rates nationally will help stabilize the trust's cash flows from the risks of development. Beginning in 1998, the company expects its new investment each year will decrease to about $600 million and shift to include more development than acquisitions as property prices continue to climb. Development, which may increase cash flow volatility, is not expected to exceed 30% of the total equity capital base in any one year. Over time, the addition of new development assets should further improve the portfolio's asset quality, diversification, and lease maturity characteristics, Standard & Poor's said.---CreditWire CONTACT: William Fitzpatrick, New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of (1) 212-208-5335 |
|
||||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion